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1 Competitor analysis At the end of this module the learning outcomes are: -Importance of understanding competition -Approaches to competitor analysis.

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Presentation on theme: "1 Competitor analysis At the end of this module the learning outcomes are: -Importance of understanding competition -Approaches to competitor analysis."— Presentation transcript:

1 1 Competitor analysis At the end of this module the learning outcomes are: -Importance of understanding competition -Approaches to competitor analysis -Identifying competitors likely response

2 2 Competitor analysis Suggested Readings Strategic Marketing Management by Wilson & Gilligan (chapter 4) Strategic Marketing by: David Cravens (chapter 7)

3 3 Competitor analysis Importance -Provides an understanding of your competitive advantage / disadvantage relative to your competitor’s position. -Insights into competitors strategies -Developing future strategies to sustain/establish advantages over your competitors.

4 4 Competitor analysis Porter's approach to competitive structure analysis Nature and intensity of competition within any industry is determined by the interaction of five key forces: 1.The threat of new entrants 2.Power of buyers 3.Threat of substitutes 4.Extent of competitive rivalry 5.Power of suppliers

5 5 Competitor analysis 1.Threat of new entrants -Depends on barriers to entry -How heavy is the capital investment Intel's huge investment into research -Strong brand image to overcome Coke investments required to build brands -Cost incurred to create distribution channels Hindustan Lever’s huge investments in distribution in rural areas

6 6 Competitor analysis 2. Power of buyers -Is likely to be higher if: 1.There are large number of suppliers 2.Alternative sources of supply 3.Threat of backward integration Example Reliance Industries 1.Started as textiles company 2.Makes raw materials to produce textiles 3.Vertically integrated 4.Bargains on price for huge quantities it picks up.

7 7 Competitor analysis 3. Threat of substitutes -Will be more prevalent if: -Customers perceive other offers to perform the same function as ours -Substitute products offer higher value for money -Substitute products earn higher profits

8 8 Competitor analysis –Onion versus ready to make paste »Dabur Hommade pastes –Tomato versus tomato puree –Scooters versus Motorcycles »Hero Honda sales at the expense of Bajaj –Vanaspati versus edible oils

9 9 Competitor analysis 4. Extent of competitive rivalry Intensity of rivalry will be greater if: -Competitors are of equal size and are seeking dominance -High fixed costs provoke price wars to maintain capacity. E.g: Airlines industry

10 10 Competitor analysis –New addition of capacity have created excess capacity Hotel industry Automobile industry –Product homogeneity necessitates activity to maintain share. » Coke versus Pepsi

11 11 Competitor analysis 5.Power of suppliers Is likely to be higher if: -There are few suppliers -Cost of switching from one supplier to another is high E.g: Intel Suppliers are likely to integrate forward Kirloskar compressors into airconditioners. Reliance entry into petroleum products retailing

12 12 Competitor analysis Against whom are we competing -Looks straight forward -Is not usually the case E.g: Bajaj Auto 1.Underestimation of LML 2.Undermining the strengths of Hero Honda -Gestetner underestimation of Xerox -Extinction of British and U.S television companies by Japanese organizations -Sharp attack by Symphony aesthetic coolers over traditional coolers

13 13 Competitor analysis Earlier clarity was high Now blurred Poor anticipation –VCR industry in 80s –decline

14 14 Competitor analysis Marketing Myopia Theodore Levitt Marketing Guru How business is defined Why American rail business a massive decline Onslaught of airlines

15 15 Competitor analysis THE COURIER MARKET came in 70s Launch of fax Later email How players handled competition

16 16 Competitor analysis Two approaches Adopt new products Strengthen existing business

17 17 Competitor analysis Adopt new products IBM Hardware in 70s Threat from low-cost producers Shifted focus to software

18 18 Competitor analysis Strength existing business FED EX Earlier couriers Competition from fax, email Shifted focus on parcel market Physical distribution required Offered door-to-door delivery

19 19 Competitor analysis FED EX Offer complete logistics solutions Found existing players not offering these solutions Gradually left the space for document courier to smaller companies

20 20 Competitor analysis MOSQUITO REPELLANT DEVICES BALSARA Launched ODOMOS in 1964 Unattended need Cream based product Inhouse R & D Earlier smoke sensing devices were used

21 21 Competitor analysis Now creams Held 97% share of the cream market What are the concerns Later Tortoise was launched Used ‘smoke’ concept Economical Gained 70% market share Odomos 20% share

22 22 Competitor analysis 1984 Goodknight brand No use of cream or coil Value proposition –Cleaner –Less messy –Convenient

23 23 Competitor analysis By late 90s Mats/liquid-70% Coils-22% Creams-9% Balsara tried to launch mats/liquid BALSARA lost the market which it created in 1964

24 24 Poor understanding of the competition Decline –Air coolers –Mopeds –Soya-based drinks

25 25 Competitor analysis Competition happens at four levels 1.Companies offering only similar products -Kitkat versus Perk -Nescafe versus Bru 2.Companies consisting of all companies operating in the same category -Cadbury's Eclairs versus. Nestle Kitkat -Canada Dry versus Pepsi Cola

26 26 Competitor analysis Competition at four levels(Contd.,) 3. Competitor consists of all companies manufacturing or supplying products which deliver the same service -Airlines versus Railways -Second hand cars versus scooters versus Tata Nano 4. Competition consists of all companies competing for the same spending power -Dishwasher versus Microwave oven -Designer jewellery versus Ritu Beri's fabrics -Debeer’s versus Nokia mobile phones

27 27 Competitor analysis IDENTIFYING COMPETITORS LIKELY RESPONSE PROFILES Three issues How competitor is likely to respond to the general changes taking place in the external environment? How competitor is likely to respond to specific moves that we make? Is the competitor likely to initiate an aggressive move?

28 28 Competitor analysis COMPETITOR PROFILES The laid-back competitor The selective competitor The tiger competitor The stochastic competitor

29 29 Competitor analysis The laid-back competitor Competitors do not react Feel customers may stay loyal Lack resources to react

30 30 Competitor analysis The selective competitor React to selective moves of competitor Modi Xerox versus HCL copiers

31 31 The tiger competitor React swiftly Strong reply Signal that it is going to fight Surf versus Ariel Competitor analysis

32 32 The stochastic competitor Do not exhibit any predictable pattern No trends available Could exhibit any type of competitor Competitor analysis

33 33 Competitor analysis COMPETITIVE EQUILIBRIUM Five scenarios If competitors are nearly identical and make their living in the same way, then the competitive equilibrium is unstable. Identical products Commodity industries Competitive equilibrium gets upset if one cuts prices

34 34 Competitor analysis If a single major factor is the critical factor, then competitive equilibrium is unstable Differentiation is possible Breakthrough in technologies Cut costs Change habits of consumers Apple’s Iphone

35 35 Competitor analysis If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differentially attractive to some customers. The more the multiple factors that may provide an advantage, the more the number of competitors who can coexist. Each competitor has his competitive segment defined by the preference for the factor trade-offs that he offers. Retailing industry in India

36 36 Competitor analysis The fewer the number of competitive variables that are critical, the fewer the number of competitors. If one factor is critical, fewer competitors. More variables, larger number of competitors, but smaller in size.

37 37 Competitor analysis A ratio of 2 in 1 in market share between two competitors seems to be the equilibrium point at which it is neither practical nor advantageous for other competitor to increase or decrease share.

38 38 Competitor analysis INDUSTRY STRUCTURE TYPES Five types Pure monopoly Differentiated oligopoly Pure oligopoly Monopolistic competition Pure competition

39 39 Competitor analysis Pure monopoly High prices Little advertising Low service levels Barriers to entry exist

40 40 Competitor analysis Differentiated oligopoly Differentiation through quality, features Reflected by the price premium which is available INTEL experience

41 41 Competitor analysis Pure oligopoly Differentiation is difficult Going-rate pricing Sustainable competitive advantage is through cost-reductions

42 42 Competitor analysis Monopolistic competition Organizations look for markets where scope of competition minimizes Pricing premium can be attained Retailing in India

43 43 Competitor analysis Pure competition No scope for differentiation Same prices Psychological differentiation Profits determined by cost management

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